Kurt's Work

Congressman Kurt Schrader (OR-05) and Congressman Peter Welch (VT-At Large) reintroduced a bill this week to close a loophole in the Medicaid Drug Rebate Program that may be costing the Medicaid program as much as $1 billion. The legislation passed in the House as part of the IMPROVE Act in the 115^th Congress.

“It’s ridiculous that these blatant abuses of the system have resulted in a billion dollar loss for taxpayers,” said Rep. Schrader. “Our bill gives CMS the proper authority to deal with these inaccuracies, preventing bad actors from taking advantage of the system and honest mistakes from costing us even more money.”

VIDEO: Rep. Schrader Urges Colleagues to Close Billion Dollar Medicaid Loophole

“For too long, drug companies have been ripping off the Medicaid program by misclassifying their products to limit required price discounts,” said Rep. Welch. “This commonsense legislation puts a stop to this unethical practice and ensures that all drugs covered by Medicaid are correctly classified.”

VIDEO: Rep. Welch Calls on Congress to Close Loophole in Medicaid Drug Rebate Program

Under the Medicaid Drug Rebate Program, drug manufacturers who wish to have their drugs covered by Medicaid must pay a rebate to federal and state governments, and the rebate rate is different for brand drugs, at 23.1 percent of the Average Manufacturer Price (AMP) per unit, and generic drugs, at 13 percent of AMP per unit. When applying for the rebate, the manufacturer must indicate whether their drug is brand or generic. According to an HHS Inspector General Report published in December of last year, however, hundreds of drugs in the rebate program that should be considered brand were marked in their applications as generic. That same report found that this may have cost the rebate program upwards of $1 billion.

Under the Schrader-Welch legislation, if a drug company knowingly misclassifies their brand drug as a generic, Centers for Medicare and Medicaid Services (CMS) will have the power to fine the drug company double the normal rebate they would have had to pay the government. The bill strengthens CMS and congressional oversight of the program to close the loophole.